From FireEagle to iPhone apps that use your current location, everyone it seems is racing to get on the geo-aware software bandwagon. So far most geo-aware features have been opt-in and offer reasonable privacy controls (FireEagle is a good example of this), but Microsoft’s upcoming Windows 7 plans to offer developers location tools at the operating system level and the company doesn’t seem to think users care about control or privacy.

Before you freak out at the thought that Redmond will soon be tracking your every move, keep in mind that the new features will be disabled by default. That’s the good news.

The bad news is that if you turn the geo features on, there are very few controls available and, yes, Microsoft could easily track your every move. Now you can freak out.

According to CNet, which saw a demo of the new geo features, once the service is turned on, there are only two means of limiting the geo-tracking — you can either limit to a specific user, or you can limit it to just traditional applications (rather than services running in the background).

But here’s the essential problem: If you enable the geo-tracking for say, a restaurant searching app in your gadgets collection, there’s no way to stop other apps from accessing your location as well. It’s an all or nothing feature.

While geo-aware locations are certain a hot item in the software world right now, they’re also at the heart of many ongoing privacy debates. Unfortunately Microsoft’s new feature is exactly the sort of thing that turns people’s mild suspicions into full, raging paranoia.

Here’s Microsoft’s explanation for why the geo-tracking will not offer much control. It’s also the paranoid’s greatest fear in a nutshell:

The reason, Microsoft officials say, is that Windows doesn’t have a reliable means of determining that an application is what it says it is, so any attempt to limit the location to a specific application would be easily spoofable.

So the short story is Windows 7 has geo-tracking features, but aside from turning them on and off, you have basically no control.